September 29, 2010

Tax competition between states is good

An Open Letter to John Christiansen, Director of the Tax Justice Network, from Roger Helmer MEP.

Dear John,

I heard your interview on the BBC World Service Radio this morning. You were fulminating against the behaviour of multinational corporations who move their headquarters to favourable tax régimes. You implied that this behaviour was damaging and immoral, and you urged, if not full international tax harmonisation, then at least international rules that would obstruct such relocation. You argued that this behaviour denied revenue to national governments, and made us all poorer.

John, you described yourself as an economist, yet you fall straight into a first-year undergraduate economic error. You assume that lower tax rates mean lower revenues. In a static economy, this might be true, and indeed obvious. But in a dynamic economy, economic actors are free to change their behaviour in response to tax incentives -- and they do. As an economist, have you never heard of the Laffer Curve? Don't you know that high tax rates inhibit growth and prosperity, and deter innovation, and entrepreneurship, and investment (including inward investment)? And that high tax rates create a powerful incentive for avoidance or evasion?

Are you not familiar with the case histories? In dozens of countries, over many decades, it's been demonstrated that lower tax rates will (counter-intuitively) actually raise total revenues. When Ronald Reagan proposed reducing tax rates to increase revenues, it was a dubbed "Voodoo Economics". But it worked.

The choice is, on the one hand, competitive taxes, growth, prosperity, investment, higher revenues and better living standards. Or on the other, high tax rates, low growth, capital flight, emigration, relative poverty. You seem to be on the side of high taxes and poverty.

You say on your web-site that Tax Havens create poverty. No. On the contrary, they serve a useful function in limiting the scope of other tax régimes to raise taxes too high, and in keeping them honest.

You describe tax competition between nations as "A Race to the Bottom". No. It's a race to growth and properity. Here in the EU, MEPs love to talk about "Harmful Tax Competition". But there is no harmful tax competition. All tax competition is good. All attempts at tax harmonisation are cartels operated by governments against the interests of citizens and tax-payers.

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Tax competition between states is good

An Open Letter to John Christiansen, Director of the Tax Justice Network, from Roger Helmer MEP.

Dear John,

I heard your interview on the BBC World Service Radio this morning. You were fulminating against the behaviour of multinational corporations who move their headquarters to favourable tax régimes. You implied that this behaviour was damaging and immoral, and you urged, if not full international tax harmonisation, then at least international rules that would obstruct such relocation. You argued that this behaviour denied revenue to national governments, and made us all poorer.

John, you described yourself as an economist, yet you fall straight into a first-year undergraduate economic error. You assume that lower tax rates mean lower revenues. In a static economy, this might be true, and indeed obvious. But in a dynamic economy, economic actors are free to change their behaviour in response to tax incentives -- and they do. As an economist, have you never heard of the Laffer Curve? Don't you know that high tax rates inhibit growth and prosperity, and deter innovation, and entrepreneurship, and investment (including inward investment)? And that high tax rates create a powerful incentive for avoidance or evasion?

Are you not familiar with the case histories? In dozens of countries, over many decades, it's been demonstrated that lower tax rates will (counter-intuitively) actually raise total revenues. When Ronald Reagan proposed reducing tax rates to increase revenues, it was a dubbed "Voodoo Economics". But it worked.

The choice is, on the one hand, competitive taxes, growth, prosperity, investment, higher revenues and better living standards. Or on the other, high tax rates, low growth, capital flight, emigration, relative poverty. You seem to be on the side of high taxes and poverty.

You say on your web-site that Tax Havens create poverty. No. On the contrary, they serve a useful function in limiting the scope of other tax régimes to raise taxes too high, and in keeping them honest.

You describe tax competition between nations as "A Race to the Bottom". No. It's a race to growth and properity. Here in the EU, MEPs love to talk about "Harmful Tax Competition". But there is no harmful tax competition. All tax competition is good. All attempts at tax harmonisation are cartels operated by governments against the interests of citizens and tax-payers.